Kalshi Faces Mounting Legal Battles With State Regulators Across the U.S.

Prediction market platform Kalshi is caught in a wave of legal disputes across several states, as the company argues its contracts should fall under federal derivatives law rather than state gambling rules. The core question at stake is whether users on these platforms are trading financial derivatives or simply placing bets.

Court Battles Playing Out in Multiple States

On Thursday, lawyers for Kalshi and Minnesota presented oral arguments over the state’s move to ban prediction markets as illegal gambling. In Nevada, the state’s Supreme Court recently denied Kalshi’s request to pause a rule requiring it to block much of its trading activity for local customers, with justices saying they were not persuaded by the company’s emergency request. Kalshi could now face further legal exposure for missing a court deadline to restrict access in the state.

In Ohio, Kalshi filed suit against the state’s gaming regulator after being penalized for allegedly running an unlicensed sports-betting operation. In Michigan, a local court granted state regulators a two-week restraining order blocking Kalshi from offering or advertising its products there. Michigan Gaming Control Board Executive Director Henry Williams said the company was targeting vulnerable residents with sports betting disguised as investing.

Federal Regulator Backs Kalshi’s Position

The Commodity Futures Trading Commission, led by chairman Mike Selig, has taken Kalshi’s side in several of these disputes, arguing that prediction market contracts function similarly to agricultural hedging instruments and should fall solely under federal oversight rather than individual state gambling laws.

States Move to Tax Prediction Market Activity

Beyond the jurisdiction fight, some states are looking to capture tax revenue from the industry’s rapid growth. North Carolina’s legislature is close to finalizing a budget bill that would tax prediction market revenue at 6% while raising taxes on traditional sportsbooks by a larger margin, drawing a clear line between the two types of betting.

New Jersey Dispute Heads Toward the Supreme Court

New Jersey attempted to regulate Kalshi under the same rules as sports gambling operators, but a federal court sided with Kalshi, ruling the CFTC likely had jurisdiction. New Jersey has since asked the U.S. Supreme Court for more time to pursue an appeal, warning that a ruling favoring federal jurisdiction could override state betting laws nationwide. Justice Samuel Alito granted the extension, pushing the deadline to August 4, 2026.